Malaysia’s ‘Silicon Valley’ seeks a reboot

The Multimedia Super Corridor (MSC) is set to get a fresh breath of life under Prime Minister (PM) Tun Dr Mahathir Mohamad.

The MSC, with Cyberjaya as its core location, was meant to promote information and communication technology (ICT) as a new growth sector that would provide new high paying jobs, and propel Malaysia’s industrialisation and urbanisation.

The farsighted PM, who first took office in 1981, had introduced various policies and agencies to support Malaysia’s transformation from an agriculture-based economy to the value-added industrial manufacturing and services sector.

He launched the first national car via the Perusahaan Otomobil Nasional Sdn Bhd in 1983 with the automotive sector today providing more than half a million jobs and some 600 autoparts suppliers in the market.

Dr Mahathir then established the Malaysian Industry-Government Group for High Technology as the technology think-tank under the purview of the PM’s Department.

It was driven through the joint chairmanship of prominent private sector leaders and the science advisor to the PM, emphasising on market intelligence initiatives to boost high technology and business opportunities.

The MSC programme was launched in November 1996 — a year ahead of the Asian financial crisis — with the aim of making Malaysia a leader in ICT.

The MSC covered an area measuring 15km by 50km stretching from the Petronas Twin Towers to the Kuala Lumpur International Airport in Sepang, Selangor, including the new administrative capital of Putrajaya and planned tech city in Cyberjaya.

Malaysia Digital Economy Corp (MDEC) was the agency overseeing the development of MSC and located in Cyberjaya.

Before ending his first term as PM in 2003, Dr Mahathir left Cyberjaya as one of the core elements in the MSC masterplan.

Dubbed as Malaysia’s very own SiliconValley, it was meant to become an ICT hub that would house various international firms and encourage the development of local companies.

In 2000, IT icon Bill Gates described the MSC in Cyberjaya as the fastest developing IT centre in the world.

“Outside the US, you won’t find an IT project where the scale and commitment and the energy being put in, is greater than this one,” the Microsoft Corp founder and shareholder said after officiating the company’s library in Cyberjaya back then.

Billions of ringgit have been spent in terms of initiatives and subsidies to allow more companies to embark in the ICT trail.

MSC was the first government mega investment in the IT and multimedia sector. It includes significant outlays of up to RM8.4 billion on installing fibre-optic networks to ensure top-of-the-range physical and information infrastructure, with the ultimate aim of replicating the successful Silicon Valley in California.

Firms wanting to operate in the MSC needed to be awarded the “MSC Malaysia Status” by the government, which required them to relocate at least 10% of their workforce to the MSC cluster, to be a primary provider of IT and multimedia services and products.

Additionally, at least 15 % of their workforce must be knowledgeable workers such as engineers and other white collar workers.

Foreign companies interested to join the programme must engage in technology transfer activities as well.

According to MDEC, as of February 2018, there are 3,241 active MSC status companies, with a total of RM47.1 billion revenue generated and 167,044 jobs created.

An Institute for Democracy and Economic Affairs’ (IDEAS) report noted that outsourcing and global business services contribute the lion’s share of 52%, or 86,801 jobs of the total jobs, infotech provided 27% or 45,327 jobs, universities and incubators 9% or 15,782 jobs, and creative content makers 6% or 10,639 jobs.

The MSC and Cyberjaya are now facing challenges. Citing various international ICT observers, the report criticised the MSC’s incentives implementation.

“Small and medium firms in this ‘constructed cluster’ are not enjoying the benefits of co-location externalities, but rather consider the government’s financial support as an important factor affecting their co-location decision.

“It is generally argued that the promised Silicon Valley is significantly short of its vision. The multi- national corporations are present, but most of them use the discounted space as call centres and customer support.

“It has not become the hub of new ‘discoveries’ and few will believe in its potential to place Malaysia on the world map of ICT innovations,” the IDEAS report published last July noted.

According to the UK’s monthly science and technology magazine, Wired, Cyberjaya had a population of only 85,000 in 2016, with one-third of the people not employed for high skill expertise, but merely there to provide support and call-centre staffing for global IT firms.

IDEAS said Cyberjaya had fallen short of its aim due to the government’s attempt of creating a flourishing hub from scratch. Instead, the report suggested the government to embrace the support in the development of naturally emerging hubs.

The author and IDEAS CEO Salman Ali, however, did not deny that Cyberjaya has contributed to creating jobs and attracting investment.

“But, it has ultimately failed in its objective of creating a world-leading IT entrepreneurial hub,” he said.

An industry observer said the vision of embracing Cyberjaya as the ICT hub post-2003 did not materialise as the leadership after Dr Mahathir did not introduce enough policies to carry the project forward.

“The fifth PM had more regressive policy to bring us back into agriculture, while the next one took more than five years in office to really look on what had happened to the township,” the observer said.

In 2013, Cyberview Sdn Bhd, the landowner, received a new mandate to transform Cyberjaya into a global technology hub.

A new blueprint was set up with the aim to expedite the creation of high-tech jobs for locals and to make Cyberjaya a preferred investment hub for tech companies again, while reaffirming its existing position as a premier ICT location. How successful it has been, is debatable.

“What we can see now is the town could become a ghost city with the overhang in commercial and residential properties, much of which are not affordable to many locals. Cyberjaya jumped on the real estate game due to its proximity to the Klang Valley,” the source said.

Last June, Dr Mahathir noted he had created Cyberjaya to concentrate on high technology, electronic and IT industries. But “now it has become just another town with the usual housing development”, he said.

Currently, the town has a population of about 102,000 with almost half the figure accounting for students at six higher education institutions.

Putrajaya announced it intends to revitalise Cyberjaya as the country prepares to embrace the Industry Revolution 4.0, which involves big data analytics; data science; the Internet of Things; as well as blockchain technology.

“We are in the process to announce some initiatives of what we will do with Cyberjaya. When we are ready, we will tell the public what we want to do and what the next initiatives are,” Communications and Multimedia Minister Gobind Singh Deo said.

Prior to that, Dr Mahathir said the MSC project will be revived to promote digitisation of the country’s economy due to its importance in the current era.

“Yes, there will be (a second wave of) MSC to suit the current digital needs,” Dr Mahathir was reported as saying.

Cyberjaya is now rated as one of 25 most competitive economies in the world as ranked by the World Economic Forum.

The city also ranked among the top 25 destinations in terms of ease of doing business by the World Bank.